Global Economics

Texting Price Caps Will 'Stifle' Market

Mobile operators poured cold water on plans to create a single EU market for text services—and put a limit on prices

Mobile operator industry body, the GSMA, has poured cold water on plans by European Commission (EC) telecoms commissioner, Viviane Reding, to create a single market for mobile text services in Europe and cap the cost of sending an SMS for EU citizens travelling in Europe.

The cost of sending a text in Europe is likely to drop by 70 per cent under Reding's plans, according to an EU source speaking to Reuters yesterday.

The EC says the 2.5 billion text messages sent every year by roaming customers cost in excess of 10 times more than domestic texts. But the GSMA says the cost of sending a text is already coming down—and warned regulation could stifle competition.

Earlier this year, Reding warned the industry it had until 1 July to make credible, voluntary price cuts in this area—and to cut costs and improve pricing clarity for data roaming—or it would face regulation.

But yesterday the telecoms commissioner made it clear she has not been impressed by the industry's efforts—on text or data roaming. And said regulation for SMS roaming will be on the way this autumn.

Reding said in a statement: "EU citizens should be free to text across borders without being ripped off. Roaming charges have already drained the wallets of mobile customers too much, especially the 77 per cent of young people who send texts while using their mobile abroad. It is not a good sign for the competitiveness of Europe's mobile industry that it still hasn't got the message that credible price reductions are needed to avoid regulation.

"I will therefore recommend to my fellow commissioners that we propose a regulation of SMS roaming in October. We will also have to discuss in which way to address data roaming, which continues to be heavily overpriced."

Yet the GSMA claims the cost of sending an SMS in Europe has declined 18 per cent since last year—and it says costs vary across different markets in Europe, making a single market approach unsuitable.

Tom Phillips, chief government and regulatory affairs officer at the GSMA, said in a statement: "According to our analysis, the average price of SMS roaming services in the EU has declined by 18 per cent in the last year, as operators launch new tariffs, allowing consumers to buy bundles of texts, as have proved so popular in domestic markets.

"The Commission's proposals to single out yet another aspect of the mobile industry and apply retail price regulation, threatens to choke growth and stifle competition."

The GSMA points to tailored roaming packages as evidence of a competitive market, and says operators have introduced data roaming transparency measures—such as software that monitors data usage, text message alerts when customers reach a predetermined threshold and near real-time billing available online.

Phillips added: "The Commission's fixation with regulating common mobile prices across the EU is widespread. Different markets have inherently different costs, whether from variations in tax or, for example, labour rates. These services should be priced based on local market conditions, not on some vision of a single Europe, originating in Brussels."

Data roaming 'shock bills' so disliked by Reding are still making headlines. Earlier this month, the Press Association reported an IT worker from Greater Manchester was landed with a bill of £31,500 after downloading some music and an episode of TV show Prison Break via a mobile broadband card while on holiday in Portugal. The bill was subsequently reduced to £229 following negotiations.